Business Context and Reporting Period
Community Healthcare Trust Inc (CHCT) filed a Form 8-K on March 19, 2021, reporting the entry into a material definitive agreement. The Company, a Maryland corporation, entered into a Third Amended and Restated Credit Agreement with a syndicate of lenders led by Truist Bank as the administrative agent.
Key Financial Metrics and Debt Structure
The filing details the restructuring of the Company's credit facility, establishing a total borrowing capacity of up to $600.0 million through an accordion feature. The specific components of the Third Amended and Restated Credit Facility are as follows:
- Revolving Facility: $150.0 million, maturing in March 2026 with a one-year extension option.
- A-2 Term Loan: $50.0 million existing facility, maturing in March 2024.
- A-3 Term Loan: $75.0 million existing facility, maturing in March 2026.
- A-4 Term Loan: New $125.0 million facility, maturing in March 2028.
- Accordion Feature: Additional capacity of up to $200.0 million subject to lender commitments.
Proceeds from the new A-4 Term Loan are designated to repay the existing $50.0 million A-1 term loan and outstanding balances under the Revolving Facility. Interest rates are floating based on LIBOR plus a margin, with potential reductions upon achieving an investment-grade credit rating.
Material Changes Versus Prior Period
The primary material change is the amendment and restatement of the Second Amended and Restated Credit Agreement dated March 29, 2017. Key changes include:
- Introduction of a new $125.0 million A-4 Term Loan.
- Refinancing of the A-1 term loan and reduction of Revolving Facility debt.
- Extension of maturities for the Revolving Facility and A-3 Term Loan to March 2026.
- Establishment of an accordion feature allowing for up to $200.0 million in incremental term loans.
Outlook, Management Commentary, and Risks
Management intends to enter into interest rate swap agreements to fix the interest rates on the entire A-4 Term Loan. Based on current market conditions, these swaps are expected to result in fixed rates ranging from 3.35% to 3.65%, dependent on leverage and other factors. The Company may also elect to convert LIBOR borrowings to prime rate borrowings.
The facility is subject to customary affirmative and negative covenants, including limitations on liens, indebtedness, distributions, and asset sales, as well as financial maintenance covenants. Events of default could permit lenders to terminate commitments and accelerate payment of all outstanding amounts.
Investor Verification Checklist
- Verify the full text of the Third Amended and Restated Credit Agreement (Exhibit 10.1) for specific covenant thresholds.
- Confirm the execution of interest rate swap agreements to lock in the projected 3.35% to 3.65% fixed rates.
- Monitor the Company's leverage ratios to determine eligibility for lower interest rate margins upon achieving an investment-grade rating.
- Review the press release (Exhibit 99.1) for additional management commentary on capital allocation strategy.